Pay for Performance Primer 10/12/18

Transcription

1 Pay for Performance Primer 10/12/18

2 Welcome to our 1st Pay for Performance Webinar Elizabeth Titus Director of Research and Evaluation, NEEP 2

3 Agenda What is Pay for Performance (P4P)? (12 mins) Megan Fisher - Senior Project Manager, NYSERDA Giselle Procaccianti Commercial & Industrial Program Manager, NEEP P4P Programs vs Traditional Energy Efficiency Programs (15 mins) Hassan Shaban Senior Data Scientist, Open Energy Efficiency Key Drivers and the future of P4P Programs (20 mins) Matt Golden - CEO, Open Energy Efficiency P4P in the Northeast (by state and/or utility) (10 mins) Mei Poon Senior Specialist for Pilots and Emerging Technologies, Consolidated Edison Patti Boyd - Senior Technology Strategist, DC Sustainable Energy Utility (DCSEU) Answers to typed questions (7 mins) Giselle Procaccianti (NEEP) Conclusion (5mins) Giselle Procaccianti (NEEP) 3

4 What is Pay-for-Performance?

5 5 What is Pay-for-Performance? Pay for Performance (P4P) is an approach to procuring energy efficiency savings that invests in measured savings at the portfolio level using a market-based program design. The P4P Pilot will be: Directed at solutions providers (aggregators) Designed and implemented in partnership with utilities Designed to allow solutions providers to innovate, reduce costs, and increase customer value Designed to accomplish deeper savings beyond the low-hanging fruit

6 Who will be involved? 6 Utilities Contractors Distributors & Vendors Aggregators Customers Financers & Insurers

7 Innovative Elements of P4P Key Elements Existing Programs P4P Opportunities 7 Compensation Measures Percentage of project cost or fixed rate for specific measures Only permitted energy efficiency measures eligible for funding Market value for delivered energy savings Measure agnostic and fuel neutral approach Timing of payments One-time payment/rebate Multiple years of cash flows Measurement of energy savings Not normally required for payment Ongoing savings calculations using weather-normalized meter data Scale and risk Project level approach to investing Design for scale and risk management at the portfolio level Program design/administrator Separate NYSERDA and utility programs Jointly administered, leverage strengths and resources

8 P4P Benefits End-Use Customers Aggregators/Contractors Utilities 8 Increased confidence in savings Access to a broader set of solutions and services, including finance solutions with little or no upfront contributions Longer and more comprehensive relationships with clean energy solution providers Flexibility to design services around what customers want Minimized transaction costs and administrative burden Multi-year cash flows that can support finance solutions and add-on services Portfolio level performance to manage risk and achieve scale Elevate EE as a utility resource, with potential temporal and locational impacts Start to shift performance risk to the market Longer term visibility into system impacts of EE Resource views as portfolios, not projects

9 The connection between M&V 2.0 and current P4P programs 9

10 M&V 2.0 Definition M&V 2.0 refers to the increasing granularity of available energy consumption data, and the enabling of automated M&V methods that continuously analyze the data and provide early, accurate and valuable insights to various stakeholders about energy savings estimates. ~Rocky Mountain Institute 10

11 Technologies that support M&V 2.0 Advanced Metering Infrastructure (AMI) Building Energy Systems Smart meters and connected devices Ubiquitous networks (e.g. Wi-Fi, Bluetooth etc.) Powerful data analytics tools 11

12 What does M&V 2.0 promise? Better accuracy More reliability Higher levels of transparency Modernize Energy Efficiency Markets Create innovative delivery mechanisms Revise policies and standardize approaches to tracking energy savings 12

13 The purpose of Pay for Performance Programs Today To track and reward energy savings as they occur M&V 2.0 supports this by: 1) Increasing the granularity of energy usage data 2) Providing improved data access and advanced analytics 13

14 Pay-for-Performance vs. Traditional Program Designs

15 Current Paradigm Regulators Program Implementers Utilities Evaluators Contractors Customers

16 Market Pay-for-Performance Sales and Marketing Contractor Management Services and Products AGGREGATORS Project Finance Consumer Finance Resource Curve Grid Resource Business Models Savings Comfort Health

17 Payment Models STANDARD MODEL PAY-FOR-PERFORMANCE Implementers propose an itemized budget Aggregators bid a unit savings price Rebates/ Incentives Flexibility in business models

18 Quantifying Savings DEEMED MODELED METERED DEER (Database of Energy Efficiency Resources)

19 Standard Calculation Methods for Energy Efficiency and Electrification Monthly, Daily, and Hourly Public 60 Stakeholders Empirical Process Python CalTRACK Engine Open Source Apache 2.0 Available Without Restriction How It Works: Code Repo:

20 Performance risk is unavoidable, but quantifiable

21 Risk Reallocation STANDARD MODEL PAY-FOR-PERFORMANCE - Utilities and their ratepayers are exposed to the bulk of performance risk. - Risk is expressed through the realization rate. - High level of evaluation risk. - Aggregators shoulder most of the implementation risks. - They are also best positioned to control and mitigate them. - Evaluation risks can be mitigated using standard weights and measures.

22 Performance Risk is Manageable in Portfolios

23 Aggregation Delivers Confidence in Savings How big does a portfolio need to be?

24 On What Types of Buildings Will This Work? *Based on out of sample test on 50 Million IOU meters in California through the CEC using 2014 and 2015 data.

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26 Key Drivers for Pay-for-Performance

27 The Big Bad Duck: Lots of Renewables but Nobody Buying

28 Non-Wires Alternatives To T&D Investments Nontraditional measure aimed at deferring, mitigating or eliminating the need for traditional utility transmission and distribution investments.

29 Electrification to Decarbonize and Build Load Declining Electric Loads

30 What Is the Problem We Need to Solve?

31 Resource Curve Resource Curve Time And Locational Savings Duck Curve

32 Fitting Flexible Demand into Distributed Energy Resource Markets

33 Price Program Design Market Design Marginal Cost of DERs Low Income Whole Building Upgrade DEEP <30% ZNE Market Transformation Programs HVAC Open Market Smart Tstat Market Value of EE Resource Depth / Duration of Savings

34 The Future of Pay-for-Performance: Flexible Demand as a Resource

35 Meter-Based Pay for Performance

36 Case Study: PG&E Residential P4P Performance payments made monthly based on OpenEE Platform running CalTRACK 2.0 Four (4) Aggregators with varied business models (2 underway, 2 in contracting) $25M total payments based on kwh & Resource Curve (time based savings)

37 Sending the Right Price Signal Savings Purchase Agreement (SPA) kwh rate + 3x Kicker for savings from 4pm to 8pm Payments based on CalTRACK / OpenEEmeter

38 Utility Pay-for- Performance Deal Structure and Financing Project Finance Private Capital Load Serving Entity Platform Aggregator Insurance Performance Risk Insurance Efficiency Businesses Channel Contractor Buildings

39 Project Finance: The long-term financing of projects based upon projected cash flows rather than the balance sheets of its sponsors.

40 Metered Efficiency Performance Insurance Savings Performance Insurance based on OpenEEmeter Measurement Portfolio-level coverage of efficiency projects Underwritten based on actuarial data

41 Roadmap To Flexible Demand Markets EEMeter Your Savings Programmatic P4P Market P4P with Aggregators Resource Curve EE Procurement

42 NYSERDA s Pay for Performance Program

43 Pilot Phase Approach 43 Three-phased approach of issuing RFPs on an annual cycle during the timeframe NYSERDA is committed to deploying $56 million over the course of the three phases Pilot will rely on an Advanced Measurement and Verification Platform that will use a standard savings calculation methodology Phases will seek to scale the model into other sectors and/or geographies Ultimate goal is to hand-off the initiative to utilities for longer term adoption Initial phase will focus on small/medium businesses with Con-Ed and homeowners with National Grid

44 44 Con Edison P4P Small and medium commercial customers Target market: Westchester County and Staten Island Approximately 70,000 customers (under 300 kw peak demand) Pilot will leverage Con Ed strengths and resources Con Ed brand, access to customers, marketing resources and customer engagement channels Customer targeting strategies and data analytics Leverage Advanced Metering investments Aggregator performance management and payments Track and value locational and temporal impacts of portfolios

45 Target market scales as AMI rollout continues 45 Total Addressable Market All Con Edison customers in service territories with AMI infrastructure Total Achievable market Customers with AMI infrastructure in Staten Island and West Chester Pilot market potential SC 2+9 AMI customers in Staten Island and West Chester with sufficient baseline record

46 Advanced M&V Solution 46 NYSERDA is in the process of competitively securing a technology solution to support P4P. The solution will: Consistently and transparently measure meter-level energy savings Employ a standardized, automated M&V method (CalTRACK) to ensure aggregators are appropriately compensated for delivered energy savings Provide visualizations and data to NYSERDA, utilities, and aggregators to build confidence and manage risk Develop data transfer protocols with and ultimate hand-off the platform to a utility model

47 Timing 47 Q Q Q Q Finalize pilot design Stakeholder meetings Release Phase 1 Aggregator RFP Select aggregators and execute contracts Aggregators begin engagement and implementation phase

48 Pay for Performance in the District of Columbia Patti Boyd DCSEU Senior Technology Strategist October 15, 2018

49 The DC Sustainable Energy Utility DCSEU Electricity Savings Gas Savings Green Jobs Renewable Generation Capacity Local Economic Development (CBE) Low-Income Spending Leveraging

50 DCSEU Pay for Performance Timeline/History <FY17 - Annual contract not favorable to P4P FY17 FY18 - Develop P4P pilot/plan FY18 - Approval to move forward with P4P plan Next steps: Oct 19 th - Release RFP seeking Preferred Pay for Performance Partners Start issuing P4P Incentive Agreements to customers 50

51 DCSEU P4P Objectives Buildings >100,000 ft 2 Leverage advances of metering and controls technology Influence customers to strive for additional savings Engage where traditional estimation methods are unable to predict expected savings or require extensive resources to do so: Duct sealing, envelope improvements, pneumatic to digital control, multiple interactive measures 51

52 DCSEU P4P Lessons Learned Internal stakeholder buy-in Data access/quality varies greatly between customers having sufficient data before analysis is a priority Customer buy-in (waiting for an incentive) Vendor management DCSEU has limited resources Vendors try to sell using DCSEU incentives 52

53 Thank you Patti Boyd 53

54 Questions? 54

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56 Upcoming Events Northeast Strategic Energy Management Collaborative Workshop Nov 6 in Burlington, VT M&V 2.0 Workshop Nov 7 in Burlington, VT HELIX Summit Dec 7 in Providence, RI More information at 56

57 Thank you! 57